Hang Seng Index FuturesHSI-HANGSENGINDEXFUTURESHKS5OPERINDEXPOINTOpenDailyContractDaily Settle-Chg in Contract Contract VolumeOpen ChangeSetlMonthPriceHighHighin OlLowLowInterestmentPricePriceJAN-12+18020,60617,78074,01933,520-22,35620,34020,60620,34020,594FEB-12+17920,62018,27649,91120.38820.62020.38120.61476,335+25,553+2MAR-12+17222,59016,0501,0215,88420.33720.56020.33720.558JUN-12+18+17720,20017,2201792,45819,95020,20019,95020,196AllContractsTotal+3,217125.130118.197
Hang Seng Index Futures HSI - HANG SENG INDEX FUTURES HK$50 PER INDEX POINT Contract Open Daily Daily Settle- Chg in Contract Contract Volume Open Change Month Price High Low ment Setl High Low Interest in OI Price Price JAN-12 20,340 20,606 20,340 20,594 +180 20,606 17,780 74,019 33,520 -22,356 FEB-12 20,388 20,620 20,381 20,614 +179 20,620 18,276 49,911 76,335 +25,553 MAR-12 20,337 20,560 20,337 20,558 +172 22,590 16,050 1,021 5,884 +2 JUN-12 19,950 20,200 19,950 20,196 +177 20,200 17,220 179 2,458 +18 All Contracts Total 125,130 118,197 +3,217
Payoff and ProfitD Payoff for a contract is its value at expirationO Payoff diagrams show the gross value of apositionatexpiration. Profit for a position in a contractis net value atexpiration of all relevant cash flows. Forward: (1) zero cash flow at initiation, (2) payforward price at expiration, (3) get asset (valueS) at expiration For forward contract, payoff = profit
Payoff and Profit Payoff for a contract is its value at expiration. Payoff diagrams show the gross value of a position at expiration. Profit for a position in a contract is net value at expiration of all relevant cash flows. Forward: (1) zero cash flow at initiation, (2) pay forward price at expiration, (3) get asset (value ST ) at expiration For forward contract, payoff = profit
Payoff on a Forward Contract Example: S&R (special and rich) index Today: Spot price = $1,0006-month forward price = $1,020D In six months at contract expiration:Case 1: Spot price = $1,050 Long position payoff = $1,050 - $1,020 = $30Short position payoff = $1,020 - $1,050 =- $30Case 2: Spot price = $1,000· Long position payoff = $1,000- $1,020 =- $20 Short position payoff = $1,020 - $1,000 = $20
Payoff on a Forward Contract Example: S&R (special and rich) index Today: Spot price = $1,000 6-month forward price = $1,020 In six months at contract expiration: Case 1: Spot price = $1,050 • Long position payoff = $1,050 – $1,020 = $30 • Short position payoff = $1,020 – $1,050 = – $30 Case 2: Spot price = $1,000 • Long position payoff = $1,000 – $1,020 = – $20 • Short position payoff = $1,020 – $1,000 = $20
Payoff Diagram for ForwardsPayoff ($)200S&R(special150and rich) index100Today: Spot50price = $1,000+ Long forward0+Shortforward6-monthforward-50price = $1,020-100150200-102025080085090095010001050110011501200S&R Index Price ($)
Payoff Diagram for Forwards S&R (special and rich) index Today: Spot price = $1,000 6-month forward price = $1,020
Forward vs. Outright PurchaseD Outright purchase:Invest $1,000 in index and own the indexForward:Invest zero, sign the contractInvest $1,020 at expiration and own the index. Same outcome: own the index at expiration. Why investing $1,000 now results in the sameoutcome as investing $1,020 later? Priceindication?
Forward vs. Outright Purchase Outright purchase: • Invest $1,000 in index and own the index. Forward: • Invest zero, sign the contract • Invest $1,020 at expiration and own the index. Same outcome: own the index at expiration. Why investing $1,000 now results in the same outcome as investing $1,020 later? Price indication?